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Insight & Opinion

Capitalise on strong property market with a diverse investment strategy

Author: Gemma





Consider your investment strategy to boost your income

People’s investment behaviours are starting to change in the UK. With the base interest rate having stayed at the same historic level of 0.5 per cent since early 2009, the tides are changing.

It no longer makes sense for people to put their money into savings accounts, because the interest is negligible, meaning investors are looking to put their money elsewhere. Property is the real gem at the moment in the investment world, with the near-constant positives since 2008 representing a chance for strong returns.

Investment strategy

This has brought property – and student property in particular – to the very top of the pile, becoming the most popular asset class in the UK. The student property market has seen investment in excess of £2 billion in the past three years, while buy-to-let stock is expected to exceed £1 trillion in value by mid-2015.

We’ve all heard the old proverb about putting all your eggs in one basket, but is this something that applies to the property market? Are new investors to the property market better spreading their money around in order to improve their chances of success or is it best to stick with just the one asset class?

While investing in one asset class is a good tactic to ensure you know what you’re doing, it can actually be far better to spread your money across the sector, capitalising on increases no matter where they come and protecting yourself against quick falls in certain areas. So how do you build a diversified property portfolio with your investment strategy?

buy to let tax changes

Spread your investment

It’s not exactly a groundbreaking revelation, but spreading your cash across a diverse range of property types means you will be less vulnerable to sector-specific market events, which can cause your investment to crash.

If you are investing in stocks and shares, for example, it will be useful to have a few different assets in your portfolio from the property sector. Buy-to-let and student properties are hot at the moment, while commercial spaces such as offices and industrial units are starting to pick up pace. Buying in more than one of these will mean you have a better chance of success.

Maintain a comfortable diversity

Variety is key in the property investment market when you’re looking for strong returns and great success. However, you need to make sure that your diverse portfolio has a comfortable mix in order to make it worthwhile.

While it will help mitigate against crashes to have a diverse portfolio, you don’t want to spread yourself too thin. Having just a little bit of money invested in too many property types will mean the effect of one picking up pace will be minimal to your overall return, so you need to make sure that you are maintaining a comfortable mix throughout your portfolio.

Investment strategy

Know when to stick or twist

When your portfolio is diverse, you need to make sure that you are aware of what to sell and when to sell it, while it’s equally important to be aware of the asset classes that you should be holding onto.

If you have bought into residential property with capital gains in mind, for example, you don’t want to be holding onto them for too long. Don’t be afraid to sell when the going is good, as this will allow you to make a return and mitigate against the risk of any sharp fall.

On the other hand, if you are putting money into buy-to-let, for example, you need to be ready to play the long game. These might not bring in a sudden cash injection, but they are fantastic additions to your portfolio to keep returns ticking over for a number of years – just remember to hold onto them.

spread your investment

Passive investment

This is a popular way to create a diverse investment strategy.

Having a number of passive investment options in your portfolio can be a great way to diversify your portfolio. Examples of these include care home and student property investments from Experience Invest.

This type of investment is ideal for a diversification plan, because they offer fully-managed units, which don’t take up all your time and attention, as well as a guaranteed return for a set number of years, which can only help with keeping your investment ticking over nicely.

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